Morningstar DBRS Upgrades Credit Rating on Aurelia SPV S.r.l. to A (sf) from A (low) (sf); Changes Trend to Stable from Positive

DBRS Ratings GmbH (Morningstar DBRS) upgraded its credit rating on the Class A Notes issued by Aurelia SPV S.r.l. (the Issuer) to A (sf) from A (low) (sf) and changed the trend to Stable from Positive.

The transaction represents the issuance of Class A, Class B, and Class J Notes (collectively, the Notes). The credit rating on the Class A Notes addresses the timely payment of interest and the ultimate repayment of principal. Morningstar DBRS does not rate the Class B or Class J Notes.

As of the 31 December 2020 cut-off date, the Class A Notes were backed by a EUR 1.51 billion portfolio by gross book value (GBV) of Italian secured and unsecured nonperforming loans originated by Banco BPM S.p.A. (the Originator or the Seller). The securitised portfolio was composed of secured loans, representing approximately 50.3% of the GBV, of which approximately 88.3% by GBV benefits from a first-ranking lien mortgage; and unsecured borrowers represented the remaining 49.7% of the GBV.

The receivables are serviced by Gardant Liberty Servicing S.p.A. (the Servicer). Master Gardant S.p.A. (Master Gardant) acts as the master servicer while Banca Finaziaria Internazionale S.p.A. operates as the backup servicer.

CREDIT RATING RATIONALE
The upgrade follows a review of the transaction and is based on the following analytical considerations:
-- Transaction performance: An assessment of portfolio recoveries as of December 2024, focusing on: (1) a comparison between actual collections and the Servicer's initial business plan forecast; (2) the collection performance observed over recent months; and (3) a comparison between the current performance and Morningstar DBRS' expectations.
-- Updated business plan: The Servicer's updated business plan as of December 2024, received in March 2025, and a comparison with the initial collection expectations.
-- Portfolio characteristics: The loan pool composition as of March 2025 and the evolution of its core features since issuance.
-- Transaction liquidating structure: The order of priority entails a fully sequential amortisation of the Notes (i.e., the Class B Notes will begin to amortise following the full repayment of the Class A Notes and the Class J Notes will begin to amortise following the repayment of the Class B Notes). Additionally, interest payments on the Class B Notes become subordinated to principal payments on the Class A Notes if the cumulative net collection ratio or the net present value cumulative profitability ratio are lower than 90%. As of the January 2025 interest payment date, these triggers had not been breached with actual figures at 185.7% and 131.9%, respectively, per the Servicer.
-- Liquidity support: The transaction benefits from an amortising cash reserve and a recovery expenses cash reserve providing liquidity to the structure and covering a potential interest shortfall on the Class A Notes and senior fees. The cash reserve target amount equal to 4.5% of the Class A Notes' principal outstanding balance and the recovery expenses cash reserve target amount of EUR 150,000; both reserves are fully funded.
-- The exposure to the transaction account bank and the downgrade provisions outlined in the transaction documents.

TRANSACTION AND PERFORMANCE
According to the latest investor report of January 2025, the outstanding principal amounts of the Class A, Class B, and Class J Notes were EUR 94.4 million, EUR 40.0 million, and EUR 12.0 million, respectively. As of the January 2025 payment date, the balance of the Class A Notes had amortised by 72.4% since issuance, and the aggregated transaction balance was EUR 146.4 million.

As of December 2024, the transaction was performing above the Servicer's business plan expectations. The actual cumulative gross collections equalled EUR 309.1 million whereas the Servicer's initial business plan estimated cumulative gross collections of EUR 173.0 million for the same period. Therefore, as of December 2024, the transaction was overperforming by EUR 136.1 million (78.7%) compared with the initial business plan expectations.

At issuance, Morningstar DBRS estimated cumulative gross collections for the same period of EUR 108.4 million in the BBB (sf) stressed scenario. Therefore, as of December 2024, the transaction was performing above Morningstar DBRS' initial stressed expectations.

Pursuant to the requirements set out in the receivable servicing agreement, in March 2025, the Servicer delivered an updated portfolio business plan. The updated portfolio business plan, combined with the actual cumulative gross collections of EUR 309.1 million as of December 2024, results in a total of EUR 549.4 million, which is 10.1% lower than the total gross disposition proceeds of EUR 610.9 million estimated in the initial business plan. The faster-than-expected collections prompt a shortened weighted-average life and a reduction in the future expected collections (-45.1%). Excluding actual collections, the Servicer's expected future collections from January 2025 amount to EUR 240.3 million. The updated Morningstar DBRS A (sf) credit rating stress assumes a haircut of 24.6% to the Servicer's updated business plan, considering future expected collections.

Considering the outperformance registered since issuance and the increased subordination, the rated bonds may now pass higher credit rating stresses in the cash flow analysis. However, Morningstar DBRS does not expect the current outperformance to be sustained, as also evidenced by the Servicer's significant downward revision of future collection expectations. In addition, there is incremental credit risk arising from the exposure to the transaction account bank, considering the downgrade provisions outlined in the transaction documents.

The final maturity date of the transaction is July 2047.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025), https://dbrs.morningstar.com/research/454196.

Morningstar DBRS analysed the transaction structure in Intex DealMaker.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: Master European Structured Finance Surveillance Methodology (4 February 2025), https://dbrs.morningstar.com/research/447080.

Other methodologies referenced in this transaction are listed at the end of this press release.

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings of the Global Methodology for Rating Sovereign Governments at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for this credit rating include the Issuer, the Servicer, and Master Gardant S.p.A., which comprise, in addition to the information received at issuance, the investor report as of January 2025; the updated business plan received in March 2025; the semiannual Master Servicer report as of December 2024; and the quarterly Master Servicer report as of March 2025.

Morningstar DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit rating, Morningstar DBRS was supplied with third-party assessments. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing this credit rating to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this transaction took place on 28 May 2024, when Morningstar DBRS upgraded its credit rating on the Class A Notes to A (low) (sf) from BBB (high) (sf) and changed the trend to Positive from Stable.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):

-- Recovery rates used: Cumulative base case recovery amount of approximately EUR 181.3 million at the A (sf) stress level, a 5% and 10% decrease in the base case recovery rate.

-- Morningstar DBRS concludes that a hypothetical decrease of the recovery rate by 5%, ceteris paribus, would lead to a confirmation of the Class A Notes at A (sf).

-- Morningstar DBRS concludes that a hypothetical decrease of the recovery rate by 10%, ceteris paribus, would lead to a confirmation of the Class A Notes at A (sf).

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

This credit rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Pablo Iturriaga, Assistant Vice President
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 22 June 2021

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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Rating European Nonperforming and Reperforming Loans Securitisations (11 April 2025), https://dbrs.morningstar.com/research/451813
-- Rating European Consumer and Commercial Asset-Backed Securitisations (18 September 2024), https://dbrs.morningstar.com/research/439583
-- European RMBS Insight Methodology (8 May 2025), https://dbrs.morningstar.com/research/453613
-- European CMBS Rating and Surveillance Methodology (4 March 2025), https://dbrs.morningstar.com/research/449278
-- Operational Risk Assessment for European Structured Finance Originators and Servicers (18 September 2024), https://dbrs.morningstar.com/research/439571
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025), https://dbrs.morningstar.com/research/454196

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.